Top PAAS Bull/Bear Pitches

Submitted November 09, 2013

Submitted May 12, 2012

Well, it is the best house in what I think is a shaky neighborhood. I do not want to own any of these miners... sell, sell, sell! I have said over and over again that they're too dangerous. We learned our lesson from Agnico and from Goldcorp.

Acquired in 2010; retroactively adding to scorecard. Extending intent to hold 2+ years. Market compound annual growth rate has been -7.07% vs. 18.38% for S&P over the period while average return on invested capital has been -2.29%. Book value per share growth rate has been -7.14%.

Our investment in PAAS has missed all quantitative performance targets. We also believe management has not been the best steward of shareholder capital over the period. In our assessment management overpaid for Minefinders, and has a track record of historically overpaying to repurchase capital stock.

Pan American Silver has weathered a very difficult period for miners, globally. The firm boasts a solid balance sheet that allowed it to withstand three years of negative earnings.

Even with some poor management decisions, and industry headwinds, we are optimistic about the firms capability to produce good long term results. Since 2012 management has lowered the all-in sustaining costs per silver ounce sold from $22.26 to $10.17. This is resulting in expanded margins, which will expand further during periods of higher silver prices. We are also optimistic about the La Colorada and Dolores mine expansions. Both expansions will significantly add silver production capacity. The need to allocate project capital for expansion will be reduced by 2018, which should increase free cash flow.

With substantially improved margins coupled, increased production capacity, and major capital investment projects mostly paid for, we believe Pan American Silver is well positioned.